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A UK firm has issued a 5 million bond which is trading at 102.5, the bonds coupon is 5% and the yield to maturity of
- A UK firm has issued a 5 million bond which is trading at 102.5, the bonds coupon is 5% and the yield to maturity of the bond is 4.5%. The yield on risk-free government bonds is 2%. The firm has 750,000 shares outstanding which are trading at 52 per share. The companys beta is 1.2 and the expected return of the FTSE250 Index (the market return) is 10%. The firm is expected to pay a dividend of 5 and its growth rate is estimated to be 4%. The corporate tax rate for the firm is 22%.
- What is the firms cost of debt?
- What is the firms cost of equity?
- If the formula for calculating the WACC= WE*RE+WD*RD(1-tc) , what is the firms weighted average cost of capital?
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Public Finance
Authors: Harvey S. Rosen
5th Edition
025617329X, 978-0256173291
